Bitcoin in Re-distribution: last move up before markdown begins
As Bitcoin has been trading sideways for the past 2 months, I have seen many people compare the recent PA to what Btc did in July. In other words, those people are claiming that Bitcoin is undergoing accumulation before rallying up to Ath. The July PA was indeed a nice Wyckoff accumulation schematic, however the recent price action is of a different nature. This analysis is a bit long, but stick around because it's quite insightful (not bragging);
According to the market theory of Wyckoff, a sequence of "re-distribution" happens when the Composite Operators (C.O.) who sold short start covering some of their positions. I'm going to quote the very good explanation from stockcharts.com:
"What happens during re-distribution is that a series of rallies and declines will occur with a general tendency for the rallies to be sharp and volatile ... (Composite Operators) sell short at the top of the range, and buy (to cover short positions) near the bottom of the range ... to provide support and not prematurely push the asset into a new downtrend before a meaningful short position can be established."
This pretty much describes what has been going on with Bitcoin the past 2 months, and provides you with an explanation for why exactly the price action has been so volatile (with super strong rallies and SOWs). It is those sharp rallies and declines that made me realise we actually haven't been accumulating, but rather re-distributing. A further piece of evidence for that is the only indicator I've added to the chart, "BTC Composite Man" from @cryptoonchain , which uses on-chain BTC data to show us when Composite Operators are on the buying side (line is blue) or on the selling side (line is pink). Until recently we see that the C.O. had been on the buying side, which corroborates the case for short-covering (buying back) explained above in the quote. Recently the line has turned pink which shows the C.O. could be currently switching to the sell side, to finally push Bitcoin into a new downtrend soon. We can draw the parallel between Bitcoin's PA and Wyckoff's re-distribution schematic as seen on the chart, ultimately Bitcoin seems like it is performing a UTAD and headed towards the top of the range (possibly above, and tricking retail into going long) before the broader downtrend resumes. Let's see how it unfolds!
According to the market theory of Wyckoff, a sequence of "re-distribution" happens when the Composite Operators (C.O.) who sold short start covering some of their positions. I'm going to quote the very good explanation from stockcharts.com:
"What happens during re-distribution is that a series of rallies and declines will occur with a general tendency for the rallies to be sharp and volatile ... (Composite Operators) sell short at the top of the range, and buy (to cover short positions) near the bottom of the range ... to provide support and not prematurely push the asset into a new downtrend before a meaningful short position can be established."
This pretty much describes what has been going on with Bitcoin the past 2 months, and provides you with an explanation for why exactly the price action has been so volatile (with super strong rallies and SOWs). It is those sharp rallies and declines that made me realise we actually haven't been accumulating, but rather re-distributing. A further piece of evidence for that is the only indicator I've added to the chart, "BTC Composite Man" from @cryptoonchain , which uses on-chain BTC data to show us when Composite Operators are on the buying side (line is blue) or on the selling side (line is pink). Until recently we see that the C.O. had been on the buying side, which corroborates the case for short-covering (buying back) explained above in the quote. Recently the line has turned pink which shows the C.O. could be currently switching to the sell side, to finally push Bitcoin into a new downtrend soon. We can draw the parallel between Bitcoin's PA and Wyckoff's re-distribution schematic as seen on the chart, ultimately Bitcoin seems like it is performing a UTAD and headed towards the top of the range (possibly above, and tricking retail into going long) before the broader downtrend resumes. Let's see how it unfolds!